Introduction
Over the last decade, banking in India has evolved beyond recognition, with emerging
technologies and digital tools entering the arena to cater to changing consumer needs.
Auctioning was one of the biggest changes in the phase of selling and even after playing a great role in residential flats selling, e-auctions have become the go-to mode.
E-auctions are not a new phenomenon, but their usage in property sales by banks is a
development that is fast transforming the real estate sector in India.
In this article, we bagged some insights on what e-auctions are, how e-auctions are changing the business of flat sales in India, the advantages of e-auctions for buyers and banks, and the future of this revolutionary process.
Why E-Auctions Specifically for Selling?
Over the last two decades, the demand for housing has continued to rise in urban centers and some emerging towns, as the Indian real estate industry continues to grow fast. However, NPAs and bad loans have created problems for both banks and real estate developers.
If the borrowers had not paid back the loan, the bank must intervene to recover it, which means acquiring the mortgaged property. Banks traditionally sold these assets via offline auctions, a process that has been slow, cumbersome, and frequently ineffective. Closures, which can now be listed online via e-auctions by banks, are hence quickly easily made available to a much wider audience. The resultant shift to online auctions has made for a more expansive, transparent, and expedient way to sell property, providing a critical lifeline to banks needing to pare down NPAs, and homebuyers seeking to buy property at lower prices.
Role of E-Auctions in Indian Banking:
Manner-wise, e-auctions are just like typical auctions, with the difference that every facet occurs online. The following is an overview of how the e-auction process works:
Bank identifies and evaluates properties — The bank finds the properties that should be
auctioned. To establish an initial price, each property is appraised by a professional.
Properties are listed by banks on dedicated e-auction platforms. While some banks have their platforms, others use third-party sites approved by the Indian government.
E-Auction Announcement: To participate impartially and to bring potential buyers to
participate, the banks announce the upcoming e-auction on their website, Newspapers, and other means of media.
Buyers Registration and KYC: Interested buyers have to register on the e-auction portal and provide the basic know your customer (KYC) information to authenticate their identities.
Earnest Money Deposit (EMD): This is the amount (5–10% of the base price in the majority of the cases) that the buyers pay to the developer to authenticate their intention of purchasing the property. This amount is returned to them if they lose.
Auction Day: Participants who were registered log into the portal and place their bids online. Bidders view the highest bid and will raise their bid if they choose to do so.
Auction Closing & Final Payment: When the auction has fully closed, the highest bidder will be the winner. The buyer pays the remaining balance over a designated period, at
which time the ownership is transferred.
This digital procedure enables banks to expedite property sales and provides buyers access to properties in an uncomplicated and clear way.
Benefits of E-Auctions for Banks
E-auctions also offer multiple important benefits to banks:
● Quick Disposal of NPAs: E-auction is a much quicker method for banks to dispose of
their NPAs which are generally not easy to dispose of.
● Wider Reach and Greater Participation — E-auctions overcome geographical
challenges and help the banks connect with more buyers from different locations.
● Transparent & Accredited Decentralised Properties: Classic auctions never lacked
services to claim transparency.
● Lower Operational Expenses: Physical auctions entail venues, manpower, and other
logistical expenditures.
● Data-Based Decision Making: With e-auction, banks can collect a fair amount of data
regarding property demand, pricing, property type, location, etc,
Benefits for Auction buyers
E-auctions can not just be favorable for banks but also prove to be a decisive
benefit for homebuyers as well:
Buy below market – Flats being sold in e-auctions are mostly available below market value which gives a good opportunity to the buyers to purchase a flat at a price that otherwise would be difficult in the open market.
Convenience and Accessibility: E-auctions eliminate the need for buyers to travel to physical auction venues, and they no longer have to deal with complicated paperwork.
Clear Bidding Process: Unlike some other traditional real estate transactions, with e-auctions you can see who is bidding. Having a transparent process where buyers can see where they are in line with the higher bid helps to create trust in the process.
Diverse Property Options — Different properties are listed by banks in these e-auctions,
including low-cost flats to high-end apartments.
Safe Transaction Procedure: Given that banks are controlled entities, customers are surely more reliable with respect to whether the transaction is real or not.
Challenges Model of E-Auctions in India While e-auctions for flat sales present immense benefits, they too faced a few challenges in India:
Digital Divide: While those in cities have easily adapted to digital, rural and illiterate
strategies may find e-auction however easy to navigate a challenge-leading to limited
participation. Lack of Understanding or Knowledge: E-auctions are new in India, and there are still many prospective buyers who do not know how it function.
This ignorance may create a rift that stops the buyers from participating and benefitting from the course of action.
Competition and Price Supply: E-auctions have an edge on this one. But demand can push prices up, particularly on blue-chip property. So for buyers, it means sticking to a realistic budget and avoiding bidding over your limits.
Bid Commitment & EMD: The mandatory payment of an Earnest Money Deposit (EMD) counts as a hindrance for many buyers, especially first-time buyers who do not have access to the funds. Also you would forfeit your EMD if you win and do not pay in full.
2 – Technical Glitches and Platform Stability: E-auctions rely on the integrity of digital tools, which leaves them susceptible to potential technical difficulties, like a server crashing or a website loading too slowly, making the bidding process more difficult. The seamless experience relies on robust technology and a simplified process.
E-Auctions: The Next Big Thing In Indian Real Estate?
Indian banking and real estate buyers will continue to grow the adoption of e-auctions as they realize the ease of use and benefits of these platforms. The future of E-Auctions in India will highly depend on the following few factors:
Government Support And Policy Initiatives: The government of India is also keen to promote digital platforms and reduce NPAs. The government can promote e-auctions across banks through appropriate policies and by providing necessary support to banks. With the advancement in technology, the e-auction platform is likely to become more sophisticated and will include real-time data analytics, mobile compatibility, and AI-based recommendations. Such developments can further streamline, and add transparency, and ease of use to the process.
Increased Familiarity and Education: Familiarity with and education of the benefits and processes of e-auctions can bolster buyer confidence in using these platforms.
Partnership with Real Estate Firms: Banks can tie up with property dealers to propagate their e-auctions and entice more bidders. Through this collaboration, banks and developers can build a joint platform that fuses auction houses owned by banks and listings, giving buyers a one-stop solution.
Enhancing Outreach To Rural Areas And Tier-II Cities: Most e-auctions are limited to urban areas, which is where they tend to gain maximum benefit; however, there is also potential to be tapped by expanding this initiative in partnership with interested states for rural areas and tier-II cities
Conclusion
The banking sector has taken to e-auctions, which in turn is changing the face of flat sales as well as property auctions in the country.
E-auctions for flat sales seem set to be a permanent feature in the real estate market as
India’s banking sector continues to be transformed by the digital revolution.
The future of e-auctions is looking positive as the future developments in technology,
support from the government and the growing awareness among the public about these
digital options.
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